, corp., - new york business divorce | business owner ... · pradip gohil, kanaksinh v aghela and...

SUPREME COURT -STATE OF NEW YORKSHORT FORM ORDERPresent:

HON. TIMOTHY S. DRISCOLLJustice Supreme Court

------------------------------------------------------------------- xIn the Matter of the Application ofPRADIP GOHIL, KANAKSINH V AGHELA andRAJSHAKTI JADEJA, individually andas shareholders of Bayside Mini Grocery,211-12 Northern Bid., Corp., BA YSIDE MINIGROCERY and 211-NORTHERN BLVD. , CORP.,

TRIAL/IAS PART: 16NASSAU COUNTY

Index No: 017824-Motion Seq. Nos. 5, 6 , 7 and 8Submission Date: 5/18/12

Petitioners- Plaintiffs,

For the Judicial Dissolution ofBAYS IDE MINI GROCERY and 211-NORTHERN BLVD., CORP.,

- against -

PRATAP GOHIL, UDAYSINH GOHIL andNEW YORK STATE DEPARTMENT OF TAXATIONAND FINANCE

Respondents-Defendants.-------------------------------------------------------------------- x

Papers Read on these Motions:

Notice of Motion , Affidavit in Support, Affirmation in Support and Exhibits...Petitioners-Plaintiffs ' Memorandum of Law in Support.......................................Notice of Cross Motion , Affdavits in Support/Opposition,Affirmation in Support/Opposition and Exhibits..............................................February 27, 2012 Correspondence and Notice of Rejection.............................Affrmation in Opposition to Cross Motion and Exhibits...................................Petitioners-Plaintiffs ' Memorandum of Law in Opposition.............................Defendan ts ' Reply Affirmation.. ........

.... ............. .... ............ ........ .............................

Petitioners-Plaintiffs ' Reply Memorandum of Law..........................................Notice of Motion for Sanctions, Affrmation in Support and Exhibits...............Notice of Cross Motion, Affrmation in Opposition/Support and Exhibits.......Reply Affrmation in Further Support of Motion for Sanctions.......................

Papers Read (cont.)

Affrmation in Opposition to Cross Motion to Disqualiy and Exhibits............Memorandum of Law in Opposition to Cross Motion to Disqualify................Affidavit of Receiver and Exhibits.......

................................. .... .... ..........................

This matter is before the court on 1) the motion fied by Petitioners-Plaintiffs Pradip

Gohil ("Pradip ), Kanaksinh Vaghela ("Kenny ), Rajshakti Jadeja ("Raj"), Bayside Mini Grocery

Mini Grocery ) and 211- 12 Northern Boulevard, Corp. ("Plaintiffs ) on Januar 9 2012 2) the

cross motion filed by Pratap Gohil ("Pratap ) and Udaysinh Gohil ("Udaysinh"

) ("

Defendants

on Februar 17 2012 3) the motion filed by Plaintiffs on April16 , 2012, and 4) the cross motion

fied by Defendants on May 4 2012 , all of which were submitted on May 18 2012. For the

reasons set forth below, the Court 1) grants Plaintiffs ' motion and directs that the Mini Grocery is

dissolved l and Defendants ' counterclaims are dismissed; 2) denies Defendants ' cross motion in

its entirety; 3) denies Plaintiffs ' motion for sanctions; and 4) denies Defendants ' cross motion for

sanctions and disqualification. The Court directs the paries to provide the Receiver, on or before

August 16 2012 , with the documents set forth in Exhibit F to the Receiver s Affdavit, which

contains "a list of documents that the Receiver would like to review pertaining to Bayside Mini

Grocery." The conference scheduled before the Court on July 18, 2012 at 9:30 a.m. is

hereby adjourned to August 21 , 2012 at 9:30 a.

BACKGROUND

A. . Re1ief Sought

Plaintiffs move for an Order 1) pursuant to CPLR 99 321 1 (a)(1) and (7), dismissing

Defendants ' counterclaims (" Counterclaims ) contained in their Verified Answer; and

2) granting specific performance of the Settlement Agreement dated July 22 2009 to dissolve the

Mini Grocery and 211- 12 Northern Blvd. , Corp. ("Property ). Plaintiffs subsequently advised

the Court that the Individual Plaintiffs have agreed to withdraw their application to dissolve the

Property.

Defendants cross move for an Order I) awarding specific performance of the Settlement

Agreement dated July 22 2009 and directing Plaintiffs to a) pay Pratap and Udaysinh, as

1 Plaintiffs have withdrawn their motion to dissolve 211-12 Northern Blvd. , Corp.

shareholders of the Mini Grocery, a salar of $723 per week; b) pay all arrears of salary due to

Pratap and Udaysinh from August 1 2010 to the present date; and c) comply with the Settlement

Agreement, Purchase and Sale Agreement and Term Sheet executed by the parties; 2) dismissing

the Petition-Complaint ("Petition ); 3) dismissing Plaintiffs ' motion to dismiss Defendants

counterclaims; and 4) dismissing Plaintiffs ' motion for specific performance in its entirety.

Plaintiffs move for an Order, pursuant to 22 N.YC.R.R. 9 130- 1.1 , imposing sanctions

against Defendants for their failure to withdraw their cross motion to dismiss the Complaint and

for specific performance seeking back salary against the Companies.

Defendants cross move for an Order 1) dismissing Plaintiffs ' application for sanctions in

its entirety; 2), granting Defendants ' application for sanctions pursuant to 22 N. YC.R.R. 9 130-

1.1; and 3) disqualifying Michael Leon, Esq. ("Leon ) and Jaspan Schlesinger LLP ("Jaspan

Schlesinger ) as attorneys for Plaintiffs , pursuant to NY DR 99 5- 101 102 and 105.

B. The Paries ' History

The paries ' history is set forth in detail in prior decisions of the Court dated

October 20 2010 ("2010 Decision ) and January 23 2012 ("2012 Decision

) ("

Prior

Decisions ). The Cour incorporates the Prior Decisions by reference as if set forth in full

herein.

As noted in the Prior Decisions , the Petition alleges as follows:

Pradip is the owner and holder of twenty five percent (25%) ofthe voting shares of the

Mini Grocery, as well as the owner and holder of fifty percent (50%) of the voting shares of211-

12 Northern Boulevard ("Property

).

Kenny is the owner and holder of twenty two and one half

percent (22. 5%) of the voting shares of the Mini Grocery, as well as the owner and holder of

twenty percent (20%) of the voting shares of the Property. Raj is the owner and holder often

percent (10%) of the voting shares of the Property. The Mini Grocery and Property are New

York corporations with offices located at 211- 12 Northern Boulevard , Bayside , New York.

Pratap is the owner and holder oftwenty two and one half percent (22.5%) of the voting

shares of the Mini Grocery, as well as the owner and holder of twenty percent (20%) of the

voting shares of the Property. Udaysinh is the owner and holder of twenty percent (20%) of the

voting shares of the Mini Grocery, and the owner and holder of ten percent (10%) of the voting

shares of the Property. The Mini Grocery, which operates as a bodega that sells various

consumer goods to the public , is a tenant ofthe Propert. The Petitioners and Respondents are

related to each other.

On July 13 , 2010 an anual and special meeting of the shareholders ("M. G.

Shareholders ) of the Mini Grocery was held , at which meeting the M.G. Shareholders voted to

1) terminate all existing directors of the board of directors ("Board") and elect a new Board

consisting of Pradip, Raj and Kenny; and 2) dissolve the Mini Grocery no earlier than

July 23 2010. Also on July 13 , 2010 , an anual and special meeting of the shareholders of the

Property ("Property Shareholders ) was held at which meeting the Property Shareholders voted

to 1) terminate all existing directors of the Board and elect a new Board consisting of Pradip, Raj

and Kenny; and 2) dissolve the Property no earlier than July 23 2010. Petitioners submit that, as

a result, the M.G. and Property Shareholders have voted to dissolve the Companies and wind up

. the Companies ' affairs.

Petitioners have recently learned that, from on or about 1998 through the present

Respondents have diverted monies , profits and/or distribution of proceeds from retained earings

Profits ) from the Mini Grocery to Respondents , without Petitioners ' permission and in

violation of their fiduciar duties and respective equity interests in the Mini Grocery.

Respondents allegedly made false representations to Petitioners regarding the correctness of

Profits that Petitioners received. Petitioners have demanded that Respondents retur the Profits

and distribute to Petitioners the appropriate Profits which Respondents have refused to do.

Petitioners submit that, in light of the foregoing, following dissolution, the majority shareholders

of the Companies should wind-up the affairs of the Companies and pursue any claims.against

Respondents on behalf of the Companies.

On or about August 11 , 2010 , Respondents filed petitions ("Family Court Petitions ) with

the Queens County Family Court against Pradip and Kenny seeking a temporary restraining order

to refrain from inter alia harassment and disorderly conduct. Petitioners allege that the

allegations in the Family Court Petitions are false and were designed to circumvent the votes of

the majority shareholders to terminate Udaysinh as an employee of the Mini Grocery, and to

terminate Pratap s salar. Petitioners dispute the allegations in the Family Court Petitions , and

submit that it is Respondents who have engaged in harassing conduct against Petitioners. On or

about August 24 , 20 I 0 , Kenny and Pradip obtained temporary restraining orders against

Udaysinh and Pratap to refrain from inter alia harassment and disorderly conduct against Kenny

and Pradip.

The Petition contains five (5) causes of action: 1) request for dissolution of the Mini

Grocery pursuant to New York State Business Corporation Law ("BCL") 9 1103 2) request for

dissolution of the Propert pursuant to BCL 9 1103 3) breach of fiduciar duty by Respondents

4) request for injunctive relief, and 5) demand for an accounting.

In the 2010 Decision, the Court denied Plaintiffs ' application for injunctive relief (" Prior

Motion ) based on the Court' s conclusion that, based on the documentation provided and in

consideration of the conflicting affdavits presented, Plaintiffs had not established a likelihood of

success on the merits. In opposition to the Prior Motion, Pratap affirmed inter alia that in 2004

he learned that Pradip had 1) obtained a mortgage on the Property without seeking shareholder

approval or notifying the other owners; 2) falsely certified to HSBC that he was the President and

sole shareholder of the business; 3) wanted to use $15 000 of the business ' proceeds from the

sale of lottery tickets for personal investments; and 4) placed his wife on the payroll and paid her

a salar, despite the fact that she performed no work for the business. Pratap affirmed that he

asked Pradip to return these funds to the business, which he has not done. Pratap initiated a

lawsuit that led to a settlement agreement dated July 22 , 2009 ("Settlement Agreement") and a

purchase and sale agreement ("Agreement") of the same date. The Agreement contains the

signatures ofPratap, Pradip, Kenny, Udaysinh and Raj. Pratap suggested that Petitioners have

moved for dissolution in an effort to avoid their obligations under that agreement.

On April 27 , 2011 , the Court signed an Order Appointing Receiver for the purposes of

selling the business known as Bayside Mini Grocery ("Company ) and the Property. On

July 15 , 2011 , the Cour signed an Order authorizing the Receiver to hire Colliers International

LI Inc. ("Colliers ) as a real estate broker to list, market and sell the Property subject to the terms

and conditions provided for in the proposed brokerage agreement with Colliers. The Court

furter ordered that the Property shall be listed , marketed and sold subject to certain terms and

conditions.

In their Verified Answer and Counterclaim (Ex. B to Leon Aff. in Supp.) dated

August 31 , 2011 , Defendants allege that Plaintiffs breached the Settlement Agreement by

1) failing to pay Pratap and Udaysinh their salary as shareholders of Mini Grocery; 2) failing to

pay back wages in an amount to be determined by non-party Mannherba Jadeja; 3) terminating

Pratap as Director and Offcer of Mini Grocery and the Property; and 4) terminating Udaysinh as

Director and Officer of Mini Grocery (Counterclaims at 141- 144). Defendants assert thirteen

(13) Counterclaims: 1) wrongful discharge ofPratap pursuant to Business Corporation Law

BCL") 99708 and 716 , 2) wrongful discharge ofPratap pursuant to BCL 9 605 , 3) wrongful

discharge of Pratap pursuant to BCL 9 706, 4) breach of contract based on the allegation that the

termination of Pratap as President an employee of Mini Grocery on October 28 , 2008 was in

violation of the agreement among the shareholders that the shareholders could remain employed

as long as Mini Grocery remained in business, 5) breach of fiduciary duty, 6) breach of duty of

good faith and fair dealing, 7) prima facie tort, 8) breach of contract and unjust enrichment for

failing to compensate Pratap for moneys he contributed to Mini Grocery from his personal funds

9) wrongful discharge of Defendants in violation of the Settlement Agreement, 10) failure to pay

salary in violation of the Settlement Agreement, 11) failure to pay back wages in violation of the

Settlement Agreement, 12) request for punitive damages , and 13) demand for an accounting with

respect to the Mini Grocery and Propert.

In the 2012 Decision, the Court addressed the Receiver s motion for an Order permitting

the Receiver to 1) accept the offer submitted by Plaintiffs Pradip and Kenny on

September 8 , 2011 to purchase the Property for $2 500 000.00 through the redemption.ofthe

shares of stock in 211- 12 Northern Blvd. Corp. owned by Defendants Pratap and Udaysinh

Pradip Offer ); 2) sign the Redemption Agreement; and 3) close on the Redemption Agreement

pursuant to the terms and conditions contained therein.

In the 2012 Decision, the Cour concluded that the Receiver, in determining the best and

highest offer, properly considered the tax consequences of the Offers , and was permitted to

consider those tax consequences , as well as any other factors he deemed appropriate , in

complying with the Cour' s directions. The Court further determined , however, that there was

some ambiguity in the prior Order regarding whether the Receiver had the discretion to accept an

offer to purchase the Property that was not a straightforward purchase ofthe Property, but rather

involved the redemption of stock, as set forth in the Pradip Offer. In light of that ambiguity, the

claims that the Receiver did not adequately consider all Offers and the Receiver s concession that

the Final Eastend Offer might be the highest and best Offer, the Court granted the Receiver

alternative application for relief and directed that 1) the Court-ordered auction shall be re-openeq

on a limited basis to permit Pradip and Eastend each to submit to the Receiver separate one time

sealed bids on or before 5:00 p.m. on February 17 2012 reflecting his/its highest and best offer

which shall not be less than $2 600 000 , and the Receiver was permitted in his sole discretion to

accept whichever offer (the Pradip Offer, or the new offer(s) by Respondents and/or Eastend)

was higher and better, whether the transaction be as a stock redemption or deed transfer; and 2) if

no further bids were obtained in the reopened auction, the Receiver was authorized to accept the

Pradip Offer. The Court directed, further, that no extensions would be granted with respect to

the Februar 17 2012 deadline.

In support of Plaintiffs ' instant motion to dismiss the Counterclaims and to direct specific

performance of the Settlement Agreement (Ex. C to Leon Aff. in Supp. ), Raj affirms that he has

complied with paragraph 5 of the Settlement Agreement which provides as follows:

There shall be a freeze on the hiring and/or firing of any employee of the Mini Grocerybeginning on the date of this agreement, except that Raj Jadeja shall , in his solediscretion, have the power to hire or fire any employee.

Raj affrms that on July 13 , 2010 , he exercised his discretion and terminated Defendants

as employees of the Mini Grocery. Moreover, although the Settlement Agreement authorizes Raj

to terminate Defendants for any reason, Raj terminated Defendants for cause upon learning that

from 1998 and possibly earlier, they improperly diverted funds belonging to the Mini Grocery.

Raj affirms that he memorialized his decision to terminate Defendants through his vote on

July 13 2010 at the anual and special meeting of the shareholders of the Mini Grocery. At the

meeting, the shareholders , by majority vote , terminated the existing directors of the board and

elected a new board consisting of Pradip, Kenny and Raj.

Raj also asks the Court to enforce paragraph 12 of the Settlement Agreement which

provides as follows:

The shareholders herein agree to make application to dissolve 211- 12 and Mini Grocery

pursuant to the (BCL J, within a reasonable period oftime after the final tax returnsfor each entity have been filed with the New York State Department of State, Divisionof Corporations.

Raj affirms that the Mini Grocery shareholders agreed, by majority vote , to dissolve the Mini

Grocery no earlier than July 23 , 2010 , at which time the Mini Grocery could fie for dissolution

and wind up the corporation s affairs. On July 13 2010 , at the annual and special meeting of the

shareholders of the Property, the Property Shareholders voted to dissolve the Property no earlier

than July 23 , 2010 , at which time the Property could fie for dissolution and wind up the

corporation s affairs. Thus , Raj Submits , the Mini Grocery and Property should be dissolved.

Plaintiffs note that the Counterclaims are asserted against the companies , and have

advised the Cour that Pradip, Kenny and Raj ("Individual Plaintiffs ) join in the Companies

application to dismiss the counterclaim and for specific performance of the Settlement

Agreement (Ps ' April 13 , 2012 Reply Memo. of Law at n. 1). The Individual Plaintiffs have

agreed to withdraw their application to dissolve the Propert (id.). Plaintiffs note, further, that on

March 2 , 2012 , Defendants withdrew that par of their cross motion and opposition that seeks to

enforce the sale of the Property under the Purchase and Sale Agreement. Thus, Plaintiffs submit

any reliance by Defendants on that Agreement to oppose Plaintiffs ' motion should sirnilarly be

withdrawn (id. at n. 2).

Pratap disputes Raj' s claim that he fired Defendants because they improperly diverted

monies from the Mini Grocery. Pratap affirms that he 1) " (hasJ never worked a day at the (Mini

Grocery J since we signed the Settlement Agreement" (Pratap Aff. at 14); 2) was never advised

by Raj that he was fired in July of2010; and 3) "was only notified by a piece of paper entitled

Minutes of the Special Meeting of the Board of Directors of (the Mini Grocery) that Uday and I

had been terminated as employees and that they also decided to terminate our salar we received

pursuant to the Settlement Agreement" (id.).

Pratap affirms that he leared that Plaintiffs have begun the process of winding up the

business of the Mini Grocery and have advised the New York City Deparment of Consumer

Affairs that the Mini Grocery is out of business. Pratap affirms that Plaintiffs have obtained a

new cigarette license under a new corporate entity and have begun using a different corporate

entity name at the premises where the Mini Grocery operated.

Udaysinh disputes Raj' s claim that he had the authority to fire Udaysinh as an employee

of the Mini Grocery. Udaysinh submits that while Raj could hire and fire anyone working as an

employee at the Mini Grocery, " (hJe was never given the discretion to hire and fire employees

who were also shareholders" (Udaysinh Aff. at ~ 8). Udaysinh submits inter alia that 1) he and

Pratap did not attend the shareholders ' meeting because they knew that a proper and legal

meeting could not be conducted without them; 2) the salar agreed to in the Settlement

Agreement was to be given to Defendants as shareholders of the Mini Grocery and Property, not

as employees , and they should have received those salaries; and 3) Plaintiffs should be precluded

from pursuing this action in light of the Settlement Agreement.

In opposition to Defendants ' cross motion to dismiss and for specific performance

Plaintiffs ' Counsel provides a copy of the transcript of proceedings before the Cour on

March 2 2012 (Ex. C to Schlesinger Aff. 'in Opp. ). During those proceedings , Plaintiffs ' counsel

advised the Cour that he is "happy" to withdraw his notice of rejection with respect to

Defendants ' cross motion (id at p. 3) and that he worked out with Defendants ' counsel a briefing

schedule that contemplated the following: 1) Defendants have agreed to withdraw the part of

their cross motion that addresses the sale of the Property; and 2) the paries agreed to enter into a

stipulation in which the Defendants wil agree not to seek to enforce any prior agreement with

respect to the sale of the Property and/or interfere with the sale of the Propert so the parties may

enter into a redemption agreement that was contemplated by the Cour under the application by

the Receiver (id). Plaintiffs ' Counsel advised the Court that what remains for the Court to

decide is the motion to dismiss and the portion of the cross motion that does not address the sale

of the Property. Defendants ' Counsel confirmed that Defendants agreed to withdraw that part of

the motion that sought to enforce the purchase sale agreement dated in 2009 , and to proceed with

the stock redemption agreement (id. at p. 4).

Plaintiffs ' Counsel provides a copy of a letter from Plaintiffs ' Counsel to Defendants

Counsel dated April 5 2012 (Ex. D to Schlesinger Aff. in Opp.). In that letter, Plaintiffs

Counsel requested that Defendants formally withdraw their cross motion to dismiss , and for

specific performance , in light of Defendants ' failure to timely move to dismiss a claim based on

res judicata and/or collateral estoppel , citing CPLR 9 3211 (e) and noting that Defendants

answered the Complaint on or about September 6 , 2011. Plaintiffs ' Counsel also advised

Defendants ' Counsel in the letter that Defendants ' cross motion for specific performance sought

an equitable remedy even though Defendants ' claim is "clearly compensable by money

damages." Thus , Plaintiffs ' Counsel maintained , Defendants ' cross motion is frivolous.

Plaintiffs ' Counsel advised Defendants ' Counsel that if Defendants failed to withdraw their cross

motion by April 10 , 2012 , Plaintiffs would seek sanctions against Defendants , including costs

and attorney s fees.

Plaintiffs ' Counsel provides a copy of the Limited Releases dated July 22 2009 (Ex. E to

Schlesinger Aff. in Opp.). In those Limited Releases , the paries released each other from claims

based on "any act, omission, matter, cause or thing which comprise the causes of action asserted

in (prior lawsuits among the parties assigned Nassau County Index Number 21312-08 and

Queens County Index Number 3834-09)." 2 The Releases provide furher:

This Release shall not affect in any respect whatsoever the right of one (1) or moreshareholders to bring an action for judicial dissolution of (the Mini Grocery and/orthe Property) in the event that the assets of the aforesaid corporations are not soldwithin one (1) year of the Settlement Agreement, dated July 22 2009 , and executedconcurently herewith. This Release does not affect the rights and obligations ofthe paries under the Settlement Agreement or any document or Exhibit annexedthereto.

The Receiver affirms that a Stock Redemption Agreement dated April 13 , 2012 (Ex. C to

Zucker Aff.) was entered into pursuant to which Defendants ' ownership interest in the Property

will be redeemed upon the consummation of the Stock Redemption Agreement. As set forth in

the Stock Redemption Agreement, this transaction shall close within sixty (60) days from the

date of the Stock Redemption Agreement.

The Receiver affirms that, in light of the fact that the propert is going to be promptly

sold, it appears that the only remaining issues involve whether the shareholders have derivative

2 Defendants have provided copies of the Stipulations of Discontinuance fied in the Prior Actions (Exs. 3

and 4 to Song Aff. in Opp./Supp.

or individual claims against each other for alleged wrongdoing. The Receiver takes no position

on those issues.

With respect to the Mini Grocery; the Receiver affirms that he was advised by brokers

that the grocery store had no value because it did not have a lease. Thus , a prospective purchaser

would be reluctant to purchase the grocery store out of concern that he might be evicted shortly

thereafter. Plaintiffs ' counsel advised the Receiver that the Mini Grocery has ceased operations

and provided the Receiver with statements relating to the assets and liabilities of the Mini

Grocery (Ex. E to Zucker Aff.. The Receiver submits that, to determine the nature of the

remaining assets and liabilities of the Mini Grocery, the paries and Receiver should review

documents responsive to the Receiver s requests (id. at Ex. F). The Receiver contends, furher

that if the Mini Grocery is no longer operational , the only remaining issue is the derivative and

individual claims , if any, by the shareholders against other shareholders.

The Receiver notes that the paries have stipulated, and the Cour has directed, the sale of

the Property. The Receiver also affirms that although "it appears" that the parties stipulated, and

the Court has directed, the sale of the Mini Grocery, this has not occurred (Zucker Aff. at ~ 9).

The Receiver submits that if the Mini Grocery has in fact ceased operations , the issues relating to

the dissolution and/or liquidation of the companies would appear to be moot and the only

remaining issues involve the shareholders ' claims against other shareholders.

C. The Paries ' Positions

Plaintiffs submit that Paragraph 9 of the Settlement Agreement "unequivocally provides

(Ps ' April 13 , 2012 Reply Memo. of Law at p. 1) that all shareholders shall receive a salar as an

employee of the Mini Grocery, and contend that Defendants were no longer entitled to receive a

salar following Raj' s termination of their employment. Moreover, Pratap s "new position (id.

that he was entitled to a salary as a shareholder, not as an employee , belies his claim for back

salar because only "employees" are entitled to a salary under the Settlement Agreement.

Plaintiffs submit that Defendants cannot nullify the vote cast at the meeting by the board of

directors of the Mini Grocery because the board validly voted to terminate Defendants as

directors and offcers of the Mini Grocery. The individual Plaintiffs collectively hold 57.5% of

the issued and outstanding shares of the Mini Grocery, as Pratap is the owner and holder of

22. 5% of the voting shares and Udaysinh is the owner and holder of20% of the voting shares.

Plaintiffs also contend that paragraph 12 of the Settlement Agreement requires the paries

to dissolve the Mini Grocery and, therefore , the Cour should issue an Order dissolving the Mini

Grocery and dismissing Defendants ' counterclaims as a matter of law. Paragraph 12 of the

Settlement Agreement does not, as Defendants suggest, require the sale of the Mini Grocery prior

to an application for dissolution. Plaintiffs note that the limited releases (Ex. E to Schlesinger

Aff. explicitly permit an application for dissolution one year after the Settlement Agreement in

the event the assets of the Mini Grocery are not sold. Plaintiffs also argue that the Limited

Releases only apply to claims or causes of action that were the subj ect of the Prior Actions and

as Plaintiffs ' claims in the Instant Action arise out of Defendants ' conduct following the

execution of the Limited Releases and dismissal of the Prior Actions, Plaintiffs may pursue their

claims against Defendants for breach of their fiduciar duties.

Plaintiffs also contend that Defendants ' reliance on a Term Sheet that has expired " should

not be countenanced" (Ps ' April 13 , 2012 Reply Memo. of Law at n. 4). The Term Sheet

required the paries to close no later than May 25 2011 but Defendants refused to close without

justification. Plaintiffs characterize it as "ridiculous (id.) for Defendants to rely on the Term

Sheet which, ifin effect, supersedes the Settlement Agreement and is at odds with Defendants

claims for back salary.

Plaintiffs also argue that the Court should deny Defendants ' motion to disqualify Leon

and Jaspan Schlesinger in light of the fact that 1) the disciplinar rutes on which Defendants rely

have been repealed; 2) disqualification pursuant to Rule 3.7 is inappropriate because Defendants

have failed to demonstrate how Leon , or Jaspan Schlesinger , representation of Plaintiffs is

prejudicial to Defendants; 3) any testimony regarding the purported issues would be cumulative

of the Plaintiffs ' testimony and , therefore , would not be necessar, paricularly because counsel

did not paricipate as an acting board member voting at the meeting; 4) Plaintiffs would be

prejudiced in light of Defendants ' lengthy delay in making this application; 5) even if the Court

were to disqualify Leon, it need not disqualify Jaspan Schlesinger; and 6) dual representation of

the companies and individual Plaintiffs is not prohibited as they do not have different interests.

Plaintiffs also argue that Defendants ' cross motion for sanctions is frivolous.

Defendants submit that a logical reading of paragraph 12 of the Settlement Agreement

compels the conclusion that the sale of the two entities must be completed prior to the dissolution

ofthe entities, as demonstrated by the requirement that the paries file a final tax return, which

cannot be accomplished until the sale of the two entities is completed. Defendants contend that

Plaintiffs ' representation to New York State that the Mini Grocery is no longer in business , and

their creation of new corporate entities, is inappropriate in light of the agreements among the

paries.

Defendants also argue that paragraph 9 reflects the paries ' agreement that Defendants are

to be paid a salary of $725 per week as shareholders until the Mini Grocery is sold. Defendants

contend that the actions taken at the meeting held on July 13 2010 were invalid because the

required quorum was not present. Defendants contend that the agreement in effect is a

Februar 18 2011 Term Sheet executed by all shareholders of both corporate entities.

Defendants contend that their cross motion to dismiss on the theories of collateral

estoppel and res judicata is not barred in light of the fact that Defendants, after issue was joined

requested the Cour' s permission to convert the motion to dismiss pursuant to CPLR

9 3211(a)(5) to a summar judgment motion pursuant to CPLR 93212 (see Ex. 1 to Song Aff. in

Supp./Opp.). Defendants also contend that their cross motion is not frivolous , as it has

substantive support and was not brought to delay or prolong this litigation. Defendants also

. argue that the Court should disqualify Leon and Jaspan Schlesinger in light of the fact that they

were present at the July 13 2010 meeting and "are the only third paries who may testify as to

what actually happened" at the meeting (Song Aff. in Supp./Opp. at ~ 27), and performed other

relevant acts , including calling for the anual and special meeting for both corporations.

RULING OF THE COURT

A. Relevant Contract Principles

A contract is to be interpreted so as to give effect to the intention of the paries as

expressed in the unequivocal language employed. Highland Sand Gravel, Inc. v. Squicciarini

272 A.D.2d 375 376 (2d Dept. 2000), quoting Morlee Sales Corp. v. Manufacturers Trust Co. , 9

N. Y.2d 16 , 19 (1961). When the terms of a written contract are clear and unambiguous , the

intent ofthe parties must be found within the four corners of the contract, giving practical

interpretation to the language employed and the paries ' reasonable expectations. Wilsey

Gjuraj, 65 AD. 3d 1228 , 1230 (2d Dept. 2009), citing Franklin Apartment Associates, Inc.

Westbrook Tenants Corp. 43 AD. 3d 860 (2d Dept. 2007), quoting Greenfield v. PhilesRecords 98 N.Y.2d 562 , 569 (2002). A written agreement that is complete , clear and

unambiguous on its face must be enforced according to the plain meaning of its terms. Lobacz

Lobacz 72 AD.3d 653 654 (2d Dept. 2010), citing Wilsey v. Gjuraj, supra at 1230 , quoting

Greenjeld supra at 569. A contract is unambiguous if the language it uses has a definite and

precise meaning, unattended by danger of misconception in the purort of the agreement itself

and concerning which there is no reasonable basis for a difference of opinion. Greenfield

Philes Records, Inc. , supra at 569 , quoting Breedv. Insurance Co. olN Am. 46 N.Y.2d 351

355 (1978), rearg. den. 46 N.Y.2d 940 (1979). If the contract, on its face , is reasonably

susceptible of only one interpretation, the contract is unambiguous and the court is not free to

alter the contract to reflect its personal notions of fairness and equity. Greenjeld, supra at 569-

570.

B. Frivolous Conduct

22 NYCRR 9 130- 1. 1 (a) authorizes the court, in its discretion, to award to any par attorney in any civil action or proceeding before the cour, except where prohibited by law, costs

in the form of reimbursement for actual expenses reasonably incured and reasonable attorney

fees , resulting from frivolous conduct. Section 130- 1 (c ) provides that conduct is frivolous if:

(1) it is completely without merit in law and cannot be supported by a reasonable argument for an

extension, modification or reversal of existing law; (2) it is undertaken primarily to delay or

prolong the resolution of the litigation, or to harass or maliciously injure another; or (3) it asserts

material factual statements that are false.

C. Disqualification of Counsel as Potential Witness

Disqualification may be required only when it is likely that the testimony to be given by

the witness is necessar. Testimony may be relevant and even highly useful but stil not strictly

necessar. A finding of necessity takes into account such factors as the significance of the

matters , weight of the testimony, and availability of other evidence. Wolfon v. Posner, 57

AD.3d 979 , 980 (2d Dept. 2008), quoting S & S Hotel Ventures Ltd. Partnership v. 777 S.

Corp. 69 N.Y.2d 437 445-446 (1987) (citations omitted). A par' s entitlement to be

represented in an ongoing litigation by counsel of his own choosing is a valued right that should

not be abridged absent a clear showing, on which the party seeking disqualification carries the

burden, that counsel' s removal is waranted. Id. quoting Goldstein v. Heid 52 AD.3d 471 471-

472 (2d Dept. 2008). In Wolfon the defendants maintained that plaintiff's attorney, and

members of his firm, were necessar witnesses for the plaintiffin the legal malpractice action at

issue. Id. The Second Department affirmed the trial cour' s order denying defendants ' motion

to disqualify plaintiff's attorney, and his law firm , from representing plaintiff on the grounds that

plaintiff's attorney had knowledge of the underlying litigation from which the allegations of legal

malpractice arose. Id. at 979.

D. Application of these Principles to the Instant Action

The Court grants Plaintiffs ' motion for specific performance of the Settlement

Agreement, and denies Defendants ' cross motion for specific performance of the Settlement

Agreement, based on the Cour' s conclusion that the language of the Settlement Agreement

reflects the parties ' intention that 1) the two entities at issue be dissolved; 2) Raj had complete

discretion to determine who should remain as an employee and, therefore, to fire Defendants; and

3) there is no support in the Settlement Agreement for Defendants ' argument that a distinction

was to be drawn between Defendants ' compensation in their role as shareholder as opposed to

their role as employee. In addition, Defendants have not provided support for their contention

that the meetings were conducted improperly and, therefore , the decisions made at those

meetings are invalid. In light of these determinations , the Cour directs that the Mini Grocery is

dissolved. The Court directs the parties to provide the Receiver, on or before August 16 2012

with the documents set forth in Exhibit F to the Receiver s Affidavit, which contains "a list of

documents that the Receiver would like to review pertaining to Bayside Mini Grocery." The

Court also dismisses Defendants ' counterclaims , which rest on premises that the Court has now

rejected. The Court also determines that, in light of the language of the Releases , Plaintiffs may

pursue their claims to the extent they are based on Defendants ' allegedly improper conduct

followingthe execution of the Limited Releases and dismissal of the Prior Actions.

The Cour denies Plaintiffs ' motion , and Defendants ' cross motion , for sanctions in light

of the heavily contested nature of this litigation and the Court' s conclusion that the arguments of

the parties have not been propounded merely for delay. The Cour denies Defendants ' cross

motion for disqualification of Michael Leon Esq. , or the Jaspan Schlesinger Firm, in part because

ofthe lateness of the application , and in part because there exist other sources , specifically the

paries , who can provide relevant testimony regarding the matters that form the basis for the

disqualification motion.

All matters not decided herein are hereby denied.

This constitutes the decision and order of the Cour.

The conference scheduled before the Court on July 18, 2012 at 9:30 a.m. is hereby

adjourned to August 21, 2012 at 9:30 a.

ENTER

DATED: Mineola, NYJuly 3, 2012

ENTERF;DJUL 1 7 2012

NAo AU COUN j

COUNTY CLERK" OffiCE